Interest Rate, Earnings Doubts Halt Market Advance
Stocks were broadly lower Tuesday as fresh interest rate jitters and worries about corporate earnings stopped the latest rally in its tracks.
After a mixed session in the morning, the market tumbled late in the day, pressured by a third consecutive rise in bond yields.
The Dow industrials ended down 94.35 points, or 0.9%, at 10,721.63.
The Nasdaq composite, which has been streaking higher in recent days, slid 50.02 points, or 1.9%, to 2,580.26.
Losers topped winners by 17 to 13 on the New York Stock Exchange.
Higher bond yields have “caused people to hesitate a little bit,” said Joseph DeMarco, head trader at HSBC Asset Management Americas, which manages $2.5 billion. “The competition from bonds above the 6% level” is depressing stocks, he said.
After sliding last week as fears waned that the Federal Reserve might sharply boost short-term interest rates to slow the economy, bond yields have climbed again in recent sessions.
The bellwether 30-year Treasury bond ended at 6.06% on Tuesday, up from 6.02% on Monday and 5.96% last Thursday.
The bond market has already priced in a quarter-point rise in the Fed’s key short-term rate when the central bank meets June 29-30. But the market is facing indigestion ahead of heavy new bond offerings from major companies. Also, the Treasury today will sell $15 billion in new two-year notes.
Some investors said Treasuries were also hurt by concern the dollar may decline in coming months, devaluing U.S. bonds held by Japanese investors.
Japan has been actively selling yen in recent days to keep the currency weak, in an effort to boost its exporters’ prospects.
But the yen strengthened slightly to 121.68 per dollar on Tuesday from 122.42.
On Wall Street, some analysts said stock investors are nervous ahead of second-quarter earnings, even though the reports overall are expected to be very strong.
Among Tuesday’s highlights:
* Heavy-industry shares paced the Dow’s losses. DuPont fell $2.44 to $67.75, International Paper dropped $1.88 to $52.63 and AlliedSignal eased $1.56 to $66.50.
But Georgia-Pacific added $1.06 to $53.50. After the market closed, the lumber and paper company said it expects second-quarter earnings to be $1 a share, versus the 89 cents expected by analysts.
* Lehman Bros. skidded $3.69 to $56.63 despite the brokerage’s report that second-quarter earnings were $2.09 a share, higher than the $1.68 average estimate from analysts.
* Drug stocks were modestly higher in the wake of Abbott Labs’ merger deal with Alza. Abbott fell 69 cents to $43.50 and Alza rose $1.50 to $47.75. Among rivals, Merck rose 31 cents to $69.75 and Bristol-Myers gained $1.19 to $69.
* Tech and Internet shares were broadly lower, with Intel off $1.13 to $55.69 and Cisco Systems down $2.06 to $59.50.
But troubled Compaq surged $1.69 to $23.81 on reports that CMGI might be interested in buying Compaq’s Alta Vista unit.
* Telecom equipment maker Covad Communications slid $2.38 to $43.88 despite being rated “buy” in new coverage by a Bank of America Securities analyst, who set an 18-month target price of $55.
* Energy stocks continued to slide. Exxon fell $1.25 to $77, Baker Hughes was off $1.94 to $30.81 and BP Amoco lost $1.06 to $110.50.
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Market Roundup, C9
